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Auto Aid Would Carry Strings

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The Associated Press

Published: December 8, 2008

CHICAGO - Amid calls for more accountability by executives at U.S. automakers, House and Senate aides were hammering out legislation that would dole out billions to the companies within a week

The sharp criticism, including a call for the exit of the General Motors chief executive, reflects deep frustration on Capitol Hill at what many lawmakers regard as years of missteps, mistakes and arrogance by the Big Three.

Behind the scenes, House and Senate aides were busy crafting the bailout legislation, which includes a provision that the government could yank back the money if a government-run board and overseer named by President George W. Bush decided the companies weren't taking steps to overhaul themselves and become viable. A congressional aide outlined the emerging measure on condition of anonymity because it is not yet completed.

The plan would draw the emergency aid from an existing loan program meant to help the automakers build fuel-efficient vehicles. The size of the package hasn't been finalized, but it is expected to be about $15 billion, several congressional aides said.

It would create an oversight board comprised of key Cabinet secretaries - from the departments of Treasury, Energy, Labor, Commerce and Transportation - plus the Environmental Protection Agency administrator to oversee a broad auto industry restructuring.

In return for the money, the carmakers would have to agree to terms similar to those placed on banks that receive funds under the $700 billion Wall Street bailout: to limit their top executives' pay packages, cease paying dividends, give the government a chunk of future gains and guarantee that taxpayers would be reimbursed before any other shareholders, the aide said.

The bill under discussion would place the special investigator overseeing the bank rescue in charge of keeping tabs on the auto bailout.

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Nearly three-fifths of General Motors Corp.'s employees make cars that are admired, popular and profitable.

They just don't work in the United States.

GM has a bigger presence and employs more people outside the United States than in it, and actually makes money selling cars around the globe. Its U.S. revenue has sunk 24 percent in the past three full years, but in the rest of the world, GM can boast a 28 percent increase.

Now, as lawmakers mull whether to provide billions of dollars in loans to keep the Detroit-based company from collapse, its global reach has become in many ways its most overlooked asset, and a key to its ultimate survival.

"A major argument for keeping GM out of bankruptcy is the strength of its foreign footprint," said Kimberly Rodriguez, a partner at accounting and management consulting firm Grant Thornton, which works with auto companies.

Company officials decline to discuss what would happen in the event of a bankruptcy. GM's international units are separate corporate entities, which means they would likely be shielded from a U.S. bankruptcy filing and could continue to operate without concerns of an American court seizing their assets, for example.

Still, if the automaker's U.S. operations fail, as GM says they will without an immediate cash infusion, it could set off a chain reaction that would not only put U.S. parts suppliers out of business, but also could throw off production schedules overseas and freeze up GM's foreign plants.

Los Angeles Times

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